BC270 Some respondents to the Discussion Paper and ED 2 urged the Board to develop an IFRS that was based on existing requirements under US generally accepted accounting principles (US GAAP).

BC271 More specifically, respondents urged the Board to develop a standard based on SFAS 123. However, given that convergence of accounting standards was commonly given as a reason for this suggestion, the Board considered US GAAP overall, not just one aspect of it. The main pronouncements of US GAAP on share‑based payment are Accounting Principles Board Opinion No. 25 Accounting for Stock Issued to Employees, and SFAS 123.

APB 25

BC272 APB 25 was issued in 1972. It deals with employee share plans only, and draws a distinction between non‑performance‑related (fixed) plans and performance‑related and other variable plans.

BC273 For fixed plans, an expense is measured at intrinsic value (ie the difference between the share price and the exercise price), if any, at grant date. Typically, this results in no expense being recognised for fixed plans, because most share options granted under fixed plans are granted at the money. For performance‑related and other variable plans, an expense is measured at intrinsic value at the measurement date. The measurement date is when both the number of shares or share options that the employee is entitled to receive and the  exercise price are fixed. Because this measurement date is likely to be much later than grant date, any expense is subject to uncertainty and, if the share price is increasing, the expense for performance‑related plans would be larger than for fixed plans.